Union Budget 2019-20: Modi government's capital expenditure declined sharply just ahead of the Lok Sabha elections and during April-May when polling was conducted for 542 Lok Sabha seats.
India Union Budget 2019: Are frequent elections good or bad for India? Prime Minister Narendra Modi’s call for one nation one election has triggered an intense debate in the country. At the start of the first session of the 17th Lok Sabha, Prime Minister Modi invited leaders of all the parties represented in the Parliament to discuss his idea of one nation one election. After the meeting with political parties, the Prime Minister announced that he would set up a committee to explore the idea of holding simultaneous Lok Sabha and assembly elections. Some opposition leaders accused the government of undermining India’s federal structure by trying to hold simultaneous elections. The opinion is sharply divided over the issue. Whether multiple elections really affect the economic growth as the imposition of model code of conduct slows down the developmental work. If the trends in the Union government’s capital expenditure during the Lok Sabha elections offer any indication then it is evident that it has registered a sharp decline before and during the polls.
Increased capital expenditure is considered an essential condition for higher economic growth.
Latest official data shows that in April-May this year, the first two months of the current fiscal, capital expenditure of the Union government has come down sharply in comparison with the same period last year.
According to the latest data released by the controller general of accounts (CGA), the Union government’s capital expenditure was just Rs 47,703 crore, which is little over 14% of its budget estimate of Rs 3,35,809 crore for 2019-20. In the first two months of the last fiscal, the total capital expenditure of the government was Rs 64,000 crore or 21.3% of the budget estimate of Rs 3 lakh crore for the fiscal.
In terms of absolute numbers, the government’s capital expenditure declined by Rs 16,290 crore or 25% over the money spent during the same period last year. If one takes into account the increase in capital expenditure in this year’s interim budget, which is pegged at Rs 3.35 lakh crore, then the government’s capital expenditure should have been over Rs 71,000 crore in April-May this year as against Rs 47,703 crore, a difference of over Rs 23,000 crore.
The sharp decline is primarily attributed to the Lok Sabha election during this period as it diverted the government machinery from developmental work to conducting the world’s largest election. However, during the same period, there was no change in the Union government’s revenue expenditure which was about 19% of the budget estimates during both the fiscals – FY 2018-19 and 2019-20. Revenue expenditure is the union government’s operational expenditure like payment of wages, pensions, interest and subsidy payments and it was unaffected by the election process.
If one looks at the Union government’s capital expenditure just ahead of Lok Sabha election, then the same decline will be visible.
In the anticipation of impending national election, the government machinery slowed down early this year. The model code of conduct (MCC) came into effect on March 10. The central government’s capital expenditure for the first 11 months of FY 2018-19 (April 18- February 19) was over Rs 2.73 lakh crore, which was 86.6% of the budget estimates of Rs 3.15 lakh crore.
However, if this number is compared with capital expenditure incurred during the same period of preceding fiscal (2017-18) then it’s a decline of 22.3% in terms of percentage. The Union government’s capital expenditure for the first 11 months (April-February) in FY 2017-18 was 109% of its budget estimates for the fiscal. However, the government’s revenue expenditure, in terms of percentage of the budget estimates during the first 11 months of 2017-18 and 2018-19 was almost at the same level of 88-90%.